Morgan Stanley highlights 'underappreciated' opportunity at Ashtead
Analysts at Morgan Stanley upgraded Ashtead to 'overweight' on Friday, stating that data centres were an "overlooked structural growth opportunity" for US construction equipment rental.
They said that the company's new work focused on the "underappreciated expansion opportunity" in data centre construction, which they believed should propel the market share consolidation narrative in US equipment rental.
"Data centre construction is a c$50bn industry in the US, or 20% of US office construction (vs 10% in FY15); and 56% of starts are concentrated in 8 states," highlighted MS.
"Average spend per centre has nearly tripled since 2014, and by 2023, hyperscale centres – with the greatest equipment rental needs (>10k sq feet) – should form over half of all centres and >80% of new starts."
The analysts said the market should support above-consensus growth for Ashtead in renting construction equipment, as well as subsequent MRO rental over the coming three years.
"The c$1bn upside puts our Sunbelt estimates 18% ahead of FY23 consensus," said MS, which also upped its price target on the firm from 2,400p to 3,000p."